Alex Raskolnikov (Columbia), Yes, Tax the Rich—and Also the Merely Affluent:
Most Americans believe that economic inequality is too high, and many think that higher taxes are the answer. There is some disagreement about who should pay higher taxes, but there is broad agreement about who should not. At least since the heyday of the Occupy Wall Street movement, “We Are the 99 Percent” has been the dividing line.
“Those in the 1 percent are walking off with the riches, but in doing so they have provided nothing but anxiety and insecurity to the 99 percent,” explained Nobel laureate Joseph Stiglitz in his 2012 book The Price of Inequality. The “main fault line in the American society is . . . between the 1 percent and everybody else,” insisted celebrated economists Emanuel Saez and Gabriel Zucman in their book The Triumph of Injustice, published amid the 2020 presidential campaign. Dramatic wealth tax proposals by Democratic presidential candidates Senators Bernie Sanders and Elizabeth Warren, chair of the tax-writing committee Senator Ron Wyden, and even an income taxation plan by Representative Alexandria Ocasio-Cortez do not come close to hiking taxes on anyone below the 1 percent threshold. The same is true of the suggestions by numerous tax academics considering how to tax the rich.
But there are plenty of reasons to expand the conversation about higher taxes to some of those in the 99 percent—specifically those with incomes in the 90th to 99th percentile. Let us call them the affluent. These Americans belong to households making between approximately $150,000 and $500,000 a year. A family needs to earn more than twice the median income to join the affluent circle, and those in its upper echelon earn seven times the median. Yet as concerns about inequality have saturated public and academic discourse, the affluent have stayed out of the spotlight. They are not that rich, after all; they are the 99 percent.
There is no doubt that those in the top 1 percent are the winners in today’s economy. But there is plenty of evidence to suggest that they are not the only winners. Whether we consider income, wealth, opportunity, political influence, tax policy, or cultural resonance, the case for higher taxes on the affluent as well as the 1 percent is much stronger than current political discussion suggests. Inequality is indeed a serious problem, and higher taxes are needed to address it. But it is misguided to focus all attention solely on the top 1 percent. …
One further reason to stop giving the affluent a tax pass is to bolster the credibility of arguments for higher taxes on the rich. A vivid image of a one-percenter has been seemingly imprinted in public imagination. The “fossil-fueled plutocrat, the Wall Street fat cat, the callow tech bro, and the rest of the so-called top 1 percent” are the “stock characters” of the U.S. inequality story, wrote Matthew Stewart in 2018. But who are the “stock characters” among the affluent?
As Richard Reeves points out, “pretty much every position in the influencing business is in fact filled by a member of the upper middle class: journalism, academia, research science, advertising, polling, publishing, the media (old and new), and the arts are, almost by definition, upper middle class strongholds.” By “upper middle class” Reeves means those in the 80th to 99th percentile, so he is clearly talking about the affluent. That academics, researchers, and journalists are part of that group has an unsettling implication. By overlooking the possibility that the affluent—and not only the rich—should pay more in taxes, affluent academics, journalists, and public intellectuals categorically exempt their own social and economic group from the same scrutiny to which they subject a different group. This is hardly the best way to strengthen one’s arguments.
Finally, it is worth asking if the affluent are ignored out of political expedience. Higher taxes on the rich are an easier sell politically than higher taxes on the affluent—and the richer the rich, the easier the sell. But even that easier sell turns out to be quite difficult. This could be the ultimate reason for the one-versus-ninety-nine divide. If the goal is to raise taxes on the one-percenters or on their upper crust, it is wise to get the support of the affluent. And to get that support it makes sense to give the affluent a tax pass.
But political expediency is not the point here. Calls for higher taxes on the one-percenters come not only from party platforms, political stump speeches, or legislative proposals. Today a singular focus on this group pervades tax policy conversation at academic conferences and in scholarly journals, books, and magazines. This self-restraint, if it may be so called, is odd. Intellectual timidity is not a trait rewarded in academia. Scholarship is full of proposals that are far less realistic than a tax increase on the affluent.
Piketty himself advocated a global tax on capital, even as he called it a “useful utopia.” James Hines and Kyle Logue argued that an independent agency akin to the Federal Reserve should set the tax rates, which they acknowledged would be “unprecedented in U.S. history.” Lily Batchelder—an influential tax professor and the current Assistant Secretary of Treasury for Tax Policy—urged enactment of a broad inheritance tax to replace the existing estate tax that is itself under a constant threat of repeal. It is unlikely that any of these proposals will turn into legislation. But political impracticability did not prevent these ideas from being advanced, considered, and debated—and rightly so. The same should be true of higher taxes on the affluent.
One tax in particular is ripe for renewed attention. A value-added tax (or a VAT) is a cornerstone of revenue-raising systems in over 160 countries, but is missing in the United States. Democrats have reservations about its regressivity while Republicans are concerned that it is a money machine. A VAT would, indeed, raise a lot of revenue (including from the affluent)—vastly more than the taxes proposed by the leading Democratic politicians. That revenue could be put toward progressive use, increasing both the overall progressivity and the government’s ability to improve the nation’s education, healthcare, and infrastructure. Moreover, there are ways of tweaking a VAT to shift more of its burden to the affluent and the one-percenters. And there are political bargains to be struck, as became clear when congressional Republicans proposed a new tax that was a not-too-distant cousin of a VAT. But for these bargains to arise, the left needs to move beyond its sole focus on the one-percenters or their upper crust. Intellectual discourse is the first place for this move to occur. In due time, politics will follow.
